gas pipelines

How Russia Uses Its Oil And Gas Pipelines As An Economic Weapon

Russia controls vast oil and gas reserves and webs of pipelines  – and it’s not afraid of using that fact as an economic weapon.

Europe produces less than half of the energy it consumes and lacks a diverse energy supplier network.  According to EU experts, this leaves the EU very vulnerable to the whims of their biggest energy supplier, Russia.

Natural gas, in particular, is very valuable to Russia. While it can be shipped pretty much everywhere, transporting gas either requires an expensive liquefaction and shipping process,  or an extensive pipeline network.

That’s been an obstacle for intercontinental U.S. exports, but also a boon to Russia, which spans one-eighth of the world’s land surface and borders 14 nations.

Combine that with 20% of the world’s natural gas reserves, and it becomes significant leverage against energy-dependent regions like Europe – especially since the oil and gas producers, Rozneft and Gazprom, respectively, are state-controlled.

The EU has imported as much as 34% of its natural gas from Russia, according to the Congressional Research Service. Germany, the largest gas consumer, obtained 40% of its gas from Russia, while other nations, such as Finland, Sweden, and the Baltic states relied on Russia for 100% of its gas imports.

 

russiangasill

Map courtesy of the Congressional Research Service.

Leveraging energy independence

Because they are so dependent on a steady flow of Russian gas, EU nations are keenly aware that their supplies could be cut off in times of tension with Russia.

The threat of Russia cutting off or increasing prices on gas is an unspoken, but not idle threat: it has shut off gas supplies twice before, in 2006 and 2009, leaving Ukrainians without heating amidst freezing winters.

Gas flows to more than a dozen European countries were disrupted by the 2009 cutoff, which occurred because of a disagreement over Ukrainian debt.

It’s no secret, however, that Russia has used its natural gas dominance to influence Ukraine – as seen in 2014 during the Crimea crisis, when Russia instituted an 80% price hike.

Almost half of the EU’s gas is transported through Ukraine. And although the arrangement has been profitable for the nation, Russia has recently expanded its natural gas infrastructure to other countries and is pressuring Ukraine to sell its aging pipelines, which would further increase Russian control.

Expanding the pipeline network

All of Russia’s natural gas exports to Europe are transported through an extensive pipeline network, which is owned and built by the state-controlled corporation Transneft.

It passes through four important transit points: the Baltic sea, Russian ally Belarus, Turkey, and, as the recent crisis has highlighted, Ukraine. The map below shows the pipeline network, with proposed new pipelines in dotted lines:

 russiangasill2

Image courtesy of Wikipedia.

The Nord Stream line, completed in November 2011, already allows Russia to export gas directly to Germany, its main customer.  A second Nord Stream line is being planned.

Russia once proposed a South Stream line, which was planned to pass through the Black Sea outside of Ukraine’s territory. However, in December 2014, Russia’s President Putin announced that the plans would be scrapped due to difficulties in securing passage through Bulgaria.  Blaming the Bulgarian difficulties on the EU, Putin pivoted to  a new initiative that would increase gas distribution to Turkey instead. That project was also suspended, after Turkey shot down a Russian fighter jet 2015 during the Syrian conflict in 2015.

Global expansion?

The expansion of Russia’s pipelines isn’t limited to Europe, however.

In 2013, Russia completed the final stage of the Eastern Siberia-Pacific Ocean (ESPO) pipeline, which now allows it to export as much as 25% of its crude of oil to Asia.

Another large project would construct a pipeline from Russia’s Sakhalin Island natural gas field, through North Korea and into South Korea, the world’s second-largest natural gas importer.

While the talks for the project have long been on hold, Russia at one point forgave 90% of North Korea’s debt in a move seen as courting approval for the pipeline.

Japan, which relies heavily on foreign energy supplies, is also hoping to import Russian gas through a proposed pipeline from the Sakhalin Island fields.

gas pipelines

In 2016 the first ships carrying liquefied natural gas (LNG) from the US arrived in Europe. Seen as a way to lessen Europe’s dependence on Russian energy, the ships actually carry only a tiny amount of the energy that Europe needs.

Though the United States has surpassed Russia’s production of oil and natural gas, the former leader in petroleum production is still among the top three. And while the U.S. is only now close to energy independence thanks to the boom in cheap shale gas, Russia has been exporting fuel for decades.

Updated. Cover photo courtesy of Michael Kauffmann, Karlsruhe, Germany, Via Wikimedia Commons, modified by Curiousmatic

We measure success by the understanding we deliver. If you could express it as a percentage, how much fresh understanding did we provide?
Ole Skaar